Does Medicare cover observation stays in the hospital?

What is an observation stay in the hospital?

Observation services are hospital outpatient services you get while your doctor decides whether to admit you as an inpatient or discharge you. You can get observation services in the emergency department or another area of the hospital.

You're an inpatient starting when you're formally admitted to the hospital with a doctor's order. If the doctor hasn't written an order to admit you, you're an outpatient, even if you spend the night in the hospital. An inpatient admission is generally appropriate when you're expected to need 2 or more midnights of medically necessary hospital care, but your doctor must order the admission and the hospital must formally admit you.

What does Medicare pay for during an observation stay?

Medicare Part B covers observation services as part of its outpatient hospital services. Because you're an outpatient, Part A pays nothing, and Part B covers your doctor services and hospital outpatient services. For example, if you go to a hospital for outpatient surgery and the hospital keeps you overnight for high blood pressure without an order to admit you, Part B covers your doctor services and hospital outpatient services, like the surgery, lab tests or intravenous medicines.

If your doctor writes an order for inpatient admission after a night in observation, you're an outpatient until the order and an inpatient after it. For most hospitals, Part A then covers your inpatient stay and all related outpatient services provided during the 3 days before your admission date.

What do I pay for an observation stay?

After you meet the Part B deductible ($283 in 2026), you usually pay 20% of the Medicare-approved amount for the doctor's or other health care provider's services, and you also usually pay the hospital a copayment for each service you get in the hospital outpatient department. In most cases, the copayment for a single outpatient hospital service can't be more than the Part A inpatient hospital deductible ($1,736 in 2026), but your total copayments for all outpatient services may be more than that deductible.

Generally, Part B doesn't cover prescription and over-the-counter drugs you get in an outpatient setting, sometimes called self-administered drugs, and many hospitals don't allow patients to bring drugs from home. If you have Medicare drug coverage (Part D), these drugs may be covered under certain circumstances; you'll likely need to pay out of pocket and submit a claim to your drug plan for a refund.

Does an observation stay count toward skilled nursing facility coverage?

No. Medicare Part A covers skilled nursing facility care only after a qualifying inpatient hospital stay: a medically necessary inpatient stay of at least 3 days in a row, counting the day you're admitted as an inpatient but not the day you leave. Time you spend in the hospital under observation or in the emergency room before you're admitted doesn't count toward the 3 days, even if you're there overnight.

You may not need a 3-day inpatient stay if your doctor participates in an Accountable Care Organization (ACO) approved for a Skilled Nursing Facility 3-Day Rule Waiver, and Medicare Advantage plans may also waive the 3-day minimum. See how Medicare covers skilled nursing facility care.

How do I know if I'm under observation?

Ask. Each day you're in the hospital, you or your caregiver should ask the hospital or your doctor, a hospital social worker or a patient advocate whether you're an inpatient or an outpatient. The hospital must give you a Medicare Outpatient Observation Notice (MOON) if you get outpatient observation services for more than 24 hours. The MOON tells you why you're an outpatient getting observation services instead of an inpatient, and how that may affect what you pay in the hospital and for care after you leave.

Can I appeal if the hospital changed my status to observation?

You may be able to. If you were admitted as an inpatient and the hospital changed your status to outpatient getting observation services, you may be able to appeal the denial of Part A inpatient coverage that came from the change, for hospital stays back to January 2009. If your appeal is approved, Part A may cover the hospital services, and skilled nursing facility services if you appealed them.

Before you're discharged, a change from inpatient to outpatient requires your doctor's agreement, and the hospital must tell you in writing that your status changed. See how to appeal a Medicare decision.